International Launch Services (ILS) has expressed its disappointment after it was reported that France-based rival Arianespace would get a two-year subsidy of E250m from the European Space Agency (ESA).
ILS president Frank McKenna said in a statement…
International Launch Services (ILS) has expressed its disappointment after it was reported that France-based rival Arianespace would get a two-year subsidy of E250m from the European Space Agency (ESA).
ILS president Frank McKenna said in a statement mid-March: “Arianespace cost reductions of E250m would have been a far better solution. But these additional cost subsidies, totalling approximately E250m over two years to fund Ariane’s operations, will continue to create a distortion of the market.”
In an interview with SatelliteFinance in mid-February, McKenna had already voiced his opposition to the governmental aid provided to the European launcher: “The subsidies Ariane receives in the form of direct cash infusions, expanded development funds, high priced ESA missions, capital injection from [the Centre National d’Etudes Spatiales] CNES as a shareholder, protectionist policies and export credit financing such as COFACE are clearly an indication that the Ariane 5 launch system is not commercially viable.
“It is our belief that the subsidies that Ariane receives to keep their operations going are in violation of the treaties and regulations that govern fair and open competition principles of the EU. The subsidies distort competition in the marketplace and create an unlevel playing field for ILS and other providers and cause long-term harm to the health of the commercial launch sector pushing out any new entrants or re-entrants.”
Faced with financial issues, Arianespace announced in October 2010 that its board started operations to increase the company’s share capital. Earlier last year, the company posted a E71.2m technical loss for fiscal 2009/2010, which it said was due to the discharge of provisions for technical and commercial risks. Arianespace also reported full year sales of E1.029bn, an increase on the E955m recorded in 2008, but down on the E1.046bn projected for 2009. As a result, Arianespace and the French government have called for financial backing to support the launch provider.
In addition, the Space Commission, part of the Air and Space Academy based in Toulouse, France, released a report last year saying that the European launcher capability is faced with organisational, financial and technical issues and needed to be reorganised to continue operating in an increasingly competitive environment.
In mid-December 2010, French president Nicolas Sarkozy announced that France would invest E250m to help build a new launcher, as part of a broader stimulus programme aimed at supporting manufacturers unveiled a year ago. He said at the time that the money invested would come on top of the recently-signed 2011-2015 contract, which gives an extra E70m to ESA.
However, France and Germany, ESA’s main contributors, have expressed diverging views over state investment in the European space industry in recent months. Back in November, as France sought to increase its investment in ESA, Germany was questioning the Galileo programmes budget, calling for new cuts.
Such differences have seemingly re-emerged over Arianespace’s subsidy. Germany was reportedly less keen than France to provide more backing to Arianespace but supported France’s proposal in return for an agreement on ESA’s participation in the international space station through 2020.
Concerning Ariane’s subsidy, McKenna reportedly said that ILS was determined to create a public record of protest. During the March’s Satellite 2011 Conference in Washington, Arianespace chairman and CEO Jean-Yves Le Gall retorted that each company represented on the launch services panel, which included ILS, receives subsidies in one form of another, and added that some are provided in a transparent manner, “the Arianespace way”, while others are not.
However, in a statement about the Satellite Conference, ILS wrote: “There is no Russian federal directive to be in the commercial market that would generate any subsidization to sell commercial missions without a return.”
Answers journalist questions at a press briefing in Washington, McKenna intimated that the Export-Import Bank of Russia may provide loan-guarantee support for ILS customers, on a selective basis. However, in an email to SatelliteFinance, ILS said that they do not currently utilise Russia’s Eximbank on any contracts.
With the 2009 financial crisis and the subsequent difficulties in obtaining debt financing, an increasing number of space focussed companies have sought to secure export credit agency backing to raise funding. McKenna was quoted saying that, although such agencies can distort the market by keeping alive companies that would otherwise fail, those low-interest loans are a reality in the current industry.
